Household Impacts of a Potential State Strategic Fuel Reserve -

This is what Newsom and Sacramento Democrats want to do to us. This in the face of the nations second highest unemployment rate, the highest cost of gas, the massive inflation caused by Sacramento policies.

“HOUSEHOLD COSTS

Job Loss California will likely lose between 3,000 and 8,700 jobs.
Wage and Benefit Reductions California workers will lose between $207 million and $621 million in lost wages and benefits (Labor Income).
Reduced GDP The state GDP (value added) will be reduced by $385 million to $1.2 billion.
Total direct costs to Californians: $610 million to $1.8 billion each year.

STATE AND LOCAL TAX REVENUE IMPACTS

Local Tax Revenue reductions of between $19 and $57 million.
State Tax Revenue reductions of between $53 and $160 million.

Total cost to federal, state and local budgets: $102 to $307 billion.”

The Newsom legacy will be clear. By December 2026, when he goes out of office, California will be in a deep recession—and the DOOM LOOP will kil off what is left of California. Great Platform to run for President in 2028, as a Democrat.

Household Impacts of a Potential State Strategic Fuel Reserve

California Center for Jobs & the Economy, 10/1/24 https://cbrtcfj.cmail20.com/t/j-e-gdttljl-udtuviyi-r/

California policies have both knowingly and intentionally reduced the gasoline supply in California. Combined with direct cost increases through Cap-and-Trade, the Low Carbon Fuel Standard (LCFS), and increased gasoline taxes, these policies have led to California’s highest-in-the-nation gas prices.

This report from the Center for Jobs and the Economy uses data and reports from California and federal agencies and departments to not only explain the reasons for California’s reduced gasoline supply, but also to quantify the impacts to working families and the state and local economy.

Key Findings

There is no debate that ABX2-1 will increase the cost of gasoline at the pump. To estimate the impacts of ABX2-1 on the economy and household budgets, the report considers three cost-impact scenarios, a 5, 10, and 15 cent per gallon increase. The below scenarios are based on 2023 gasoline usage.

HOUSEHOLD COSTS Job Loss California will likely lose between 3,000 and 8,700 jobs. Wage and Benefit Reductions California workers will lose between $207 million and $621 million in lost wages and benefits (Labor Income). Reduced GDP The state GDP (value added) will be reduced by $385 million to $1.2 billion.

Total direct costs to Californians: $610 million to $1.8 billion each year. STATE AND LOCAL TAX REVENUE IMPACTS Local Tax Revenue reductions of between $19 and $57 million. State Tax Revenue reductions of between $53 and $160 million. Total cost to federal, state and local budgets: $102 to $307 billion.

California knowingly and intentionally reduced its gasoline supply…

California’s fuel markets are effectively isolated through regulation. The Air Resources Board (CARB) unique formulation regulations limit the type of compliant fuels that can be sold. These rules apply only to California, and the compliant fuels are largely limited to what can be produced in-state, although imports of both finished gasoline and blending stocks now account for about 3-7% of demand in recent years as in-state refinery capacity has continued to decline.

No other state and no other nation has chosen to restrict access to global supply sources to this extent, making it difficult if not impossible to assess the costs and effects of the reserve proposal based on examples in other areas.

In 1991, when CARB adopted the summer/winter blends, which first isolated the California gasoline market, CARB recognized the impact on small refineries and therefore supply: “The options available to small refiners are limited; they must either install capital equipment to produce gasoline of the specified quality or to withdraw from the California gasoline market and target alternative markets.” Since then, a series of policies have further isolated the California market, including additional regulations in 2003 and additional pending changes to LCFS.

…and continues to do so regardless of the cost impacts to working families

Importing from other countries is about to be reduced by CARB port regulations. Imports from other countries will soon be affected by CARB’s Ocean Going At-Berth Regulation taking effect for tankers beginning January 2025. Similar requirements currently limit the number of container vessels able to use the San Pedro Bay ports to essentially a “California fleet” of vessels equipped with the necessary environmental components including those related to shore power and fuels.

These import factors limit flexibility and extend the possible response times during production shortfalls. They also represent constraints and additional costs that would result from a reliance on imports for building and maintaining additional reserves. Imported fuel and blends generally have a higher cost due to transportation costs compared to refining these products in-state.

The concept of a state fuel reserve isn’t new.
The idea goes back to the 1990s and has been repeatedly rejected by state officials and experts.

While the concept of a state fuel reserve dates back to 1993, a more thorough examination of the policy was done in 2003 as part of Attorney General-sponsored legislation. The Energy Commission analyzed the feasibility of such a policy and found: The Commission found that a strategic fuel reserve could have several unintended consequences, which could limit its effectiveness as a tool to moderate gasoline price spikes and could reduce the total supply of gasoline in the state. In addition, the Commission has determined that investment in private storage capacity is increasing, which reduces the need for SFR public storage.

The Commission instead recommended a further report on steps required to improve marine infrastructure and port facilities to facilitate expanded supply through imports and development of a state licensing authority to expedite permitting of petroleum storage infrastructure and related facilities. CARB’s Ocean Going At-Berth Regulation taking effect for tankers in January is a direct contradiction to the Commission’s recommendations and will only exacerbate gasoline cost increases. The Energy Commission again evaluated a state fuel reserve through its Petroleum Market Advisory Committee in 2014-2016.

The Committee considered the need for a California state strategic gasoline inventory, but along with the other proposals under consideration “did not reach agreement that any of these policy options would appropriately address price volatility in California.”

How do ABX2-1 costs compare to market volatility spike costs for consumers?

The governor’s office has consistently used a talking point that ABX2-1 would save consumers $2 billion per year. Using all publicly available sources, and the price spikes from 2022 and 2023, there does not appear to be data to back up this claim. Using similar methodology used to calculate the cost increases of ABX2-1, the Center calculates that the actual costs of the gasoline spike in 2023 above the expected fluctuations in line with US prices were $800 million to $1.4 billion, or a mid-point estimate of $1.1 billion.

Rather than an annual cost, this estimate is a one-time cost coming from the unique circumstances during the Fall 2023 changeover to the winter formulation. The $610 million to $1.8 billion of costs for the proposed storage mandate in contrast would be paid by Californians year after year.

ABX2-1 is just one of the many upcoming state policies increasing the cost of gasoline.

Whether the myriad unique factors that led to gasoline price spikes in 2022 and 2023 will ever be replicated is up for debate. However, there is no debate that gasoline prices will continue to increase due to several state policies going into effect. ABx2-1 price increases would be in addition to and coming at the same time as higher costs from pending CARB regulations.

Although the final cost is likely to vary somewhat due to recent changes in the proposed language, CARB previously estimated that is amendments to the Low Carbon Fuel Standard (LCFS) would increase gasoline prices by 47 cents a gallon for gasoline in 2025, rising to a peak of $1.83 by 2041. Based on CARB’s economic impact statements, pending amendments to the Cap-and-Trade program would raise gasoline prices by an additional 22 cents.

The graphic below shows the average cost per tank of gas (average 14-gallon tank) for the rest of the U.S. vs. California under existing policies and the cumulative cost of upcoming policies. All calculations are based on a baseline of August 2024 average gasoline prices.